South Africa must reform white-dominated economy: Zuma

JOHANNESBURG (Reuters) - South Africa's economy is still largely under the control of whites who held power under apartheid, President Jacob Zuma said on Tuesday, and he called for a "dramatic shift" to redress the wealth balance more evenly in favor of the black majority.

Such calls have been a staple of ANC strategy documents for years and Zuma's policy speech comes months before he will seek re-election as leader of the faction-ridden movement in December. He has also been facing demands from the party's youth wing to nationalize mines and seize white-owned farmland.

Zuma, speaking at the start of a major policy meeting of his ruling African National Congress, said the challenges of poverty, unemployment and inequality posed long-term risks for Africa's richest country 18 years after the end of apartheid.

"The structure of the apartheid-era economy has remained largely intact," Zuma told several thousand ANC delegates.

"The ownership of the economy is still primarily in the hands of white males as it has always been," he added.

Without giving details, he called for a "dramatic shift and giant leap" in coming years to spread the country's wealth more equitably, mentioning the distribution of mineral resources and land ownership as areas which needed to be overhauled.

Zuma said this proposed "second transition" was necessary to complement the negotiated end of apartheid in 1994, when he said "certain compromises" over economic ownership had been made to ensure a smooth political transition from white minority rule.

While draft proposals to be considered at the conference advocate a greater role for state-owned enterprises, Zuma made clear however that the ANC's strategy has been to seek to boost growth and create jobs through "a thriving mixed economy".

The former liberation movement ANC has had a spotty record in ending economic disparity that is among the highest in the world. It has brought housing, electricity and running water to millions, but almost half the population still lives in poverty.

According to Statistics South Africa, 29 percent of blacks are unemployed compared with 5.9 percent of whites, while IHS Global Insight, an economic consultancy, estimates that whites have an average income nearly seven times that of blacks.

Zuma's government has been criticized by three global ratings agencies for ineffective leadership in tackling a broken education system, rigid labor market and chronic unemployment eroding the country's economic competitiveness.

The ANC has drafted a raft of policy documents that call on mining firms to pay more to the state to help finance welfare spending. The proposals also advocate relying on state-owned enterprises to be engines of job creation and growth.

But Zuma may be more focused on lining up support for an ANC party leadership election at the end of the year than in policies, analysts said. If he wins the party race, he is poised to also win a second term as president, serving until 2019.

"His speech did not convince me that he was serious about cleaning house. It was half-hearted considering that corruption is a very serious problem in government," said Susan Booysen, a political analyst at Wits University in Johannesburg.

"His first priority is not to make enemies."

DEBATE OVER MINES AND LAND

Zuma acknowledged rising anger and frustration in deprived communities about the poor delivery of basic public services such as electricity, water, sanitation, transport and health. His government has faced an increasing number of protests, some of them turning violent, against defective public services.

"You can't sit and say 'it's fine'. We are in government, we have to do something about it," the president told delegates, although he added violent lawlessness would not be tolerated.

Zuma said the debate over how the country's mining wealth should be used must go beyond simply the question of "to nationalize or not to nationalize." Calls for nationalization from some sectors of the ruling ANC have stirred investor concerns in the world's No. 1 platinum producer.

The party produced a research paper earlier this year saying nationalizing mines could bankrupt the state, but it suggested increasing taxes on windfall mining profits.

This countered calls from firebrand ANC Youth League former leader Julius Malema who was a vocal nationalization advocate. He was expelled from the party for indiscipline this year in what was widely seen as a political boost for Zuma.

Zuma said the conference should consider how the state can obtain an "equitable share" of mineral wealth, which could be used more to benefit poor communities.

He also called for a new programme for land reform, saying the current "willing buyer-willing seller" policy had been too slow in returning white-owned farmland to blacks dispossessed by the apartheid state. But he did not spell out what alternative mechanisms of land ownership transfer should be adopted.

South Africa's black economic empowerment policy designed to give disenfranchised blacks greater ownership of the economy should be strengthened, Zuma added.

This policy has been criticized from within the ANC and by its governing allies in organized labor as only benefiting a small sliver of the population with political ties to the party.

The policy conference will end on Friday and its deliberations are being held behind closed doors.